Before we begin imposing government regulation on the internet we need to think about unintended consequences that hinder innovations in infrastructure and use.
When regulations are put in place we need to think of the internet not as it is now, but how it will be, and predicting the future is a difficult task.
The 1998 Internet Fairness Act banned taxes on internet access, to encourage adoption, and banned special and discriminatory taxes on internet based businesses and goods.
States are struggling with their budgets and rather than tighten their belts they are looking for new revenue streams. They look to target those who have no recourse, out of sate businesses and consumers. They attempt to do this through hotel occupancy taxes, rental car taxes, online travel agent taxes, business activity taxes, and online sales tax.
Today Americans for Tax Reform is launching the Taxes Without Borders initiative. It will combat all these stealth taxes, but today at State of the Net Americans for Tax Reform President, Grover Norquist, focused on internet sales tax.
Rather than attempting to collect a use tax that is due at the state level, states have gone to the federal government and asked for a new tax regime that poses dangers to the future of business development via the internet, and the regulatory implications will span more than just internet based businesses.
Slippery Slope – Opens the door for further government intervention in the internet and for states to reach across their borders for other taxes
Too Confusing – Small businesses would be forced to accommodate over 9,000 highly variable state and local tax codes and be required to settle disputes with out of state revenue boards in out of state courts.
Discourages Tax Competition -Rather than competing to lower taxes and attract businesses, states will compete to raise taxes on residents of other states
Expands State Tax Authority – State Governments will be able to tax across their borders despite clear legal and judicial precedent arguing otherwise
Threatens Privacy – Business and state revenue boards with a track record of losing private information will have more chances to do so.